House: Tax reforms up for fine-tuning

The House of Representatives is poised to pass on second reading next week the Duterte administration’s proposed Comprehensive Tax Reform Package that leftists have denounced as anti-poor.

This came after Speaker Pantaleon Alvarez led an all-party caucus on Wednesday to fine-tune House Bill 4774, which aims to lower income taxes and finance the infrastructure programs of the administration.

“This is the crown jewel of the Duterte economic agenda,” Rep. Dakila Cua of Quirino, chairman of the House committee on ways and means, said at a news conference after the caucus.

Cua said the bill’s passage, which will raise taxes on fuel and petroleum products and lift some value-added tax  exemptions will result in more revenues for the government.

Alvarez earlier said the House will pass the measure on third and final reading before Congress adjourns in June.

Among the key features:

• The lowering of personal income tax rates as proposed by the Finance Department but indexed to cumulative Consumer Price Index inflation every three years;

• A flat rate of 6 percent for the estate and donor’s taxes;

• A broadening of the tax base by removing special laws on VAT exemptions, including those for cooperatives, housing and leasing, but retaining exemptions for seniors and persons with disabilities;

• A staggered excise tax increase for petroleum products from 2018 to 2020 but with no indexation to inflation, and liquefied petroleum gas (LPG) used as feedstock to be exempted from the hike;

• A five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax increases; and

• Earmarking of 40 percent of the proceeds from the fuel excise tax increase for social protection programs for the first three years of the tax reform measure’s implementation.

Cua said the zero-VAT rate was also retained for the renewable energy sector and limited to direct exporters, pending the establishment of the DOF-proposed cash refund system, in which refunds can be obtained by the beneficiary-taxpayers within 90 days of their application for such exemptions.

The bill provides that employees earning P250,000 a year will be exempted from paying income tax.

Citing government data, Cua said 83 percent of tax payers belong to this category.

The bill also provides that for those earning over P250,000 but not higher than P400,000 or Bracket 2, a 20 percent tax will be imposed on the excess over P250,000 starting in the second half of 2017 to 2019.

It also proposes to retain the exemption of the first P82,000 of the 13th month pay.

Earlier, leftist lawmakers said the new tax package would hurt the poor because it would raise the cost of basic goods and services, while providing them no extra relief because they were not paying taxes anyway.